Four former employees of Maine Oxy, an Auburn welding equipment and specialty gas supply company, filed a federal lawsuit against the company and its CEO alleging they were forced to sell their company stock at a deeply discounted price.
The 23-page lawsuit, filed April 25 in the U.S. District Court of Maine, seeks class action status.
The lawsuit claims that Maine-Oxy Acetylene Supply Co. and Dan Guerin, its president and CEO, misrepresented the value of stock owned by employees when Guerin bought the company.
Maine Oxy was employee-owned from 2004 until October 2013, when Guerin owned a 51 percent share. He took over full ownership in December 2013, buying the 49 percent owned by employees.
An Employee Stock Ownership Plan company is owned by employees, who receive stock in the company. It can serve as both incentive compensation and retirement income. Another example of an ESOP is Johnny’s Selected Seeds in Waterville.
“At a minimum, defendants intentionally and/or negligently misrepresented the value of the employees’ 49 percent share of the company in order to facilitate the repurchase of the employee stock at a steep discount,” the lawsuit said.
The complaint alleged numerous violations of the Employee Retirement Income Securities Act, or ERISA.
It was filed by former Maine Oxy employees Ernest J. Glynn, Jeffrey T. MacDonald, Douglas K. Johnson and Joshua T. Richardson,
The four alleged that they were forced to sell their stock for $134 per share. The deal for all 24,500 employee-owned stock totaled $3.3 million.
The lawsuit said the Albiston family owned the company until 2004. In that year, majority shareholder Bruce Albiston sold enough of his shares to establish the company ESOP. The ESOP had a 49 percent share in 2012.
Also in 2012, Bruce Albiston stepped away from the company and reportedly held confidential negotiations with Guerin, who bought the 51 percent of the company that Albiston still owned.
The lawsuit said Guerin, upon becoming the new owner of the company, informed the ESOP committee that Maine Oxy could not afford the ESOP and that it would have to be dissolved and its shares sold back to the company.
“Mr. Guerin made it clear to the committee that a stock repurchase was the only way that the company could stay independent,” the lawsuit said.
The suit alleges that in May or June 2016, an ESOP participant met with Albiston, who said he had received $43 million for his 51 percent of the company.
Diana Picavet, marketing manager at Maine Oxy, said she could not comment on the sale price because it was not disclosed as far as the company knows, and the company itself did not disclose it.
“Maine Oxy is aware of the lawsuit filed in district court by four former employees. While we cannot comment on the specifics of this matter, we deny any allegations of wrongdoing. During Maine Oxy’s 90-year history, our employees have always been our biggest asset and the reason behind our greatest achievements,” Picavet said in an email.
“It is disheartening to learn that these four former employees felt they weren’t treated fairly during their time with the company. We will vigorously defend against this lawsuit and look forward to presenting our facts in court,” she wrote.
The plaintiffs claim that Guerin played an active and effective role in forcing employees to sell their shares back to the company. They said employees who didn’t want to sell back their stock “were subject to threats, intimidation and harassment.”
The lawsuit is seeking compensation for losses and restoration of any profits made by Guerin using ESOP assets, among other relief.
Maine Oxy, founded in 1929, has 16 locations in all New England states except Connecticut and three in Canada. Its Maine locations are in Auburn, Hermon, Presque Isle, Rockland, South Portland and Waterville.
The company’s revenue was about $38 million when Guerin bought it.
Maine Oxy merged with the Lynox Welding Supply of Presque Isle in December 2016.